Firms with rural exposure feel buoyant as IMD predicts normal monsoon
The forecast of a normal monsoon this year has brought cheer to firms that have significant exposure to rural areas.
This includes auto, fast-moving consumer goods (FMCG), durables and seed majors. A third of FMCG sales come from the hinterlands, while one in every two motorcycles sold in India is in the countryside. In the case of durables, 20-25 per cent of sales for companies comes from rural, while tractor and seed majors depend completely on the farm sector.
Ajay S Shriram, chairman & senior MD of fertiliser major DCM Shriram, said, "Good rabi output for 2016-17 has led to an improvement in cash flow for companies. The mood of the farming community is also buoyant. The news, therefore, of a normal monsoon will further brighten the prospects of agriculture and should lead to healthy consumption of agri inputs like fertilisers."
Normal rainfall would help in driving up rural consumption and accelerating overall growth, said Sunil Kataria, business head, India and Saarc, Godrej Consumer Products. “The forecast of a normal monsoon is positive for us. Rural India is a key driver of FMCG growth and rural sales depend on monsoon as it is linked to farm output and income."
C M Singh, chief operating officer, Videocon Industries, said, he was relieved with this piece of news. "For those riding the summer season with compressor-led products such as air conditioners and refrigerators, the summer is turning out to be good one with heat rising across the country. Now, a projection from IMD that the monsoon will be normal will mean that Diwali could be good, too, because rural consumers shop during the festive season."
S Ravikumar, president (business development), Bajaj Auto, said, “We had good rainfall last year. Another year of normal monsoon will mean good news for the industry, as an agrarian economy brings a large chunk of sales."
Tractor makers are also upbeat. “News of normal monsoon with fair distribution across India is a sure sentiment booster and will have positive impact on farm income and rural economy," said Ravi Menon, CEO, Escorts Agri Machinery. Niranjan Kumar, chief executive officer of Hyderabad-based GARC Seeds, said, "Apart from creating healthy demand for seeds of various crops in the kharif season, good rainfall will also increase the groundwater table, thereby helping farmers cultivate crops well under irrigation."
The IMD has said the monsoon would be 96 per cent of the long-period average (LPA), one percentage point below last year's rainfall, and would be fairly distributed across the country.
While El Niño conditions could set in, it said that was likely to happen in the latter half of the rainy season, around August-September.